Is it a good company at a reasonable price? What I do not like about this stock is that this royalty stock is completely dependent on the Keg Restaurants being able to pay royalties and we have very little information on how the Keg Restaurants are doing. For this reason, I would personally not buy this stock. The stock price does seem to be relatively cheap.
I do not own this stock of Keg Royalties Income Fund (TSX-KEG.UN, OTC-KRIUF). This was a stock suggested by one of my readers. I like dinning at The Keg. I find the food very good. At stock forums I viewed, investors liked this company as it is guaranteed 4% of the sales at Keg restaurants as income to the fund. So, I decided to take a look at it.
When I was updating my spreadsheet, I noticed that the last estimates for this stock was for 2019 and 2020. So, no analysts at the moment are following this stock. This is not a good sign that it has been dropped. Also, Keg Restaurant Limited owns Exchange Partnership Units, which are 32% of the units of the fund. There are currently 11,353,500 fund units and 5,325,030 Exchange Partnership Units for a total of 16,678,530 units.
The other thing to mention, which I do not like, is that this fund is entirely dependent on Keg Restaurant Limited (KRL) being able to pay royalties, but we do not get much information about. Also, as far as I can see, some 99% of Keg Royalties Income Fund Assets depend on KRL.
If you had invested in this company in December 2012, for $1,000.50 you would have bought 69 shares at $14.50 per share. In December 2022, after 10 years you would have received $691.20 in dividends. The stock would be worth $1,101.93. Your total return would have been $1,793.13. This is a total return would be a total return of 7.66% per year with 0.97% from capital gain and 6.69% from dividends.
| Cost | Tot. Cost | Shares | Years | Dividends | Stock Val | Tot Ret |
|---|---|---|---|---|---|---|
| $14.50 | $1,000.50 | 69 | 10 | $691.20 | $1,101.93 | $1,793.13 |
The current dividend yield is high with dividend growth restarting. The current dividend yield is high (7% and higher) at 8.67%. The 5, 10 year and historical median dividend yields are good (5% and 6% ranges) at 6.45%, 5.89% and 6.94%. The dividend growth over the past 5 years is low (below 8%) at just 0.5% per year. This is mainly because dividends were cut in 2020 and increased back to those of 2019 in 2022.
The Dividend Payout Ratios (DPR) are too high. The DPR for 2022 for Earnings per Share (EPS) is 242% with 5 year coverage at 167%. The DPR for 2022 for Distributable Cash (DC) is 105% with 5 year coverage at 103%. For this stock, this is the important one. The DPR for 2022 for Cash Flow per Share (CFPS) is 48% with 5 year coverage at 51%. The DPR for 2022 for Free Cash Flow (FCF) is 95% with 5 year coverage at 99%.
| Item | Cur | 5 Years |
|---|---|---|
| EPS | 241.53% | 167.24% |
| DC | 104.68% | 102.90% |
| CFPS | 48.41% | 51.36% |
| FCF | 95.36% | 98.55% |
Debt Ratios are fine, but I would like to see what the ones for KRL are also. The Long Term Debt/Market Cap Ratio for 2022 is fine at 0.87 and also currently at 0.96, but it is best if they are below 0.50. The Liquidity Ratio for 2022 is fine at 1.47 and good at 2.86 currently. The Debt Ratio for 2022 is good at 1.58 and good at 1.74 currently. The Leverage and Debt/Equity Ratios for 2022 are fine at 2.73 and 1.73 and 2.34 and 1.34 currently.
| Type | Year End | Ratio Curr |
|---|---|---|
| Lg Term R | 0.87 | 0.96 |
| Intang/GW | 0.76 | 0.76 |
| Liquidity | 1.47 | 2.86 |
| Liq. + CF | 4.41 | 10.02 |
| Debt Ratio | 1.58 | 1.74 |
| Leverage | 2.73 | 2.34 |
| D/E Ratio | 1.73 | 1.34 |
The Total Return per year is shown below for years of 5 to 21 to the end of 2022. Under the Capital Gain column is the portion of the Total Return attributable to capital gains. Under the Dividend column is the portion of the Total Return attributable to dividends. See chart below.
| From | Years | Div. Gth | Tot Ret | Cap Gain | Div. |
|---|---|---|---|---|---|
| 2017 | 5 | 0.50% | 0.88% | -4.39% | 5.27% |
| 2012 | 10 | 1.69% | 7.66% | 0.97% | 6.69% |
| 2007 | 15 | -0.34% | 9.27% | 1.46% | 7.81% |
| 2002 | 20 | 3.78% | 12.84% | 2.77% | 10.08% |
| 2001 | 21 | 3.78% | 11.18% | 2.77% | 8.41% |
The 5-year low, median, and high median Price/Earnings per Share Ratios are 13.13, 15.18, and 17.23. The corresponding 10 year ratios are 17.02, 18.98 and 24.05. The corresponding historical ratios are 11.44, 13.90 and 15.42. The current P/E Ratio is 16.17 based on a stock price of 13.10 and EPS for the last 12 months of 0.81. This ratio is below the low ratio of the 10 year median ratios. This stock price testing suggests that the stock price is relatively cheap. Although, normally a ratio of 16.17 would be considered reasonable.
I get a Graham Price of $13.34. The 10-year low, median, and high median Price/Graham Price Ratios are 1.35, 1.48 and 1.79. The current P/GP Ratio is 0.98 based on a stock price of $13.10. This ratio is below the low ratio of the 10 year median ratio. This stock price testing suggests that the stock price is relatively cheap.
I get a 10-year median Price/Book Value per Share Ratio of 1.96. The current P/B Ratio is 1.34 based on a Book Value of $110.8M, Book Value per Share of $9.76 and a stock price of $13.10. The current ratio is below 10 year median ratio by 32%. This stock price testing suggests that the stock price is relatively cheap.
I get a 10-year median Price/Cash Flow per Share Ratio of 8.77. The current P/CF Ratio is 5.47 based on Cash Flow per Share for the last 12 months of 2.40. The current ratio is 31% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively cheap.
I get an historical median dividend yield of 6.94%. The current dividend yield is 8.67% based on dividends of $1.135 and a stock price of $13.10. The current yield is 25% above the historical median dividend yield. This stock price testing suggests that the stock price is relatively cheap.
I get a 10 year median dividend yield of 5.89%. The current dividend yield is 8.67% based on dividends of $1.135 and a stock price of $13.10. The current yield is 47% above the 10 year median dividend yield. This stock price testing suggests that the stock price is relatively cheap.
The 10-year median Price/Sales (Revenue) Ratio is 7.65. The current P/S Ratio is 5.17 based on Revenue for the last 12 months of $27.06M, Revenue per Share of $2.53 and a stock price of $13.10. The current ratio is 32% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively cheap.
Results of stock price testing is that the stock price is probably relatively cheap. The dividend yield tests say this and it is confirmed by the P/S Ratio test. All the other tests say the same thing.
When I look at analysts’ recommendations, I find a Hold recommendation on the Wall Street Journal site. They also give a stock target price of $3.50 US$ which would be approximately $4.17 CDN$. It is hard to know how serious to take this.
The last analyst recommendation on Stock Chase was in 2017 and it was a Hold. Stock Chase gives this stock one star out of 5. It is not on any of the dividend lists I follow. Ambrose O'Callaghan on Motley Fool says he is targeting this stock because restaurants have rebounded post-pandemic. Amy Legate-Wolfe on Motley Fool thinks this is a good royalty stock to hold in your TFSA. The company put out a Press Release on their 2022 year end results. The company put out a Press Release on their third quarter of 2023 results.
Simply Wall Street via Yahoo Finance talks about who owns shares in this company. Simply Wall Street has two warnings of interest payments are not well covered by earnings; and earnings have declined by 23.7% per year over past 5 years.
The Keg Royalties Income Fund is a Canada-based company. The organization works in the Restaurant business sector. Its primary activity is operating and franchising keg steakhouses and bar restaurants in Canada and the United States. The target market of this company is those people who want a higher-end casual dining experience. Its web site is here Keg Royalties Income Fund.
The last stock I wrote about was about was Wild Brain Ltd (TSX-WILD, OTC-WLDBF) ... learn more. The next stock I will write about will be Stantec Inc (TSX-STN, NYSE-STN) ... learn more on Friday, December 1, 2023 around 5 pm. Tomorrow on my other blog I will write about Mary Harrington.... learn more on Thursday, November 30, 2023 around 5 pm.
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